Implementing Next Generation Supply Management Practice

1) “Are you in?” (to the adoption of Next Generation Supply Management practices)

2) “Do you want to know what the next step would to elevating the practice of procurement in your company?”

If you read that preceding entry and are now reading this one, you likely answered “yes” to both those questions and are interested in learning just exactly the “next step” is that I’m talking about. So, without further ado…

In a world of Internet transactions, online auctions, worldwide logistics, etc., it is easy to lose sight of the fact that for a purchase to occur, someone—at some point—has to manufacture something. And that the manufacturing efficiency of that someone—usually a supplier—is the key underlying element to the performance they can provide customers.

In my first three blog posts it was shown how on their own, the traditional “trinity” of supply management metrics (as-delivered quality, on-time delivery and price) don’t reveal much about supplier manufacturing efficiency. It was also shown that Manufacturing Critical-path Times (MCTs)—“true” lead-times—do. Consequently, the next step that needs to be discussed is how to implement the adoption of MCT as your primary metric of supplier performance.

To practice Next Generation Supply Management you will need know the MCTs of the products you purchase. The best way to get this is to have your suppliers provide you with MCT maps for every part they sell you. The remainder of this blog post will lay out how you can gather those MCTs.

MCTs are part number—not supplier—specific. That’s because parts—not suppliers—have lead-times. In fact, you’ll probably find a wide variation in MCT of the parts supplied by the same supplier. Note that this is at variance with the standard (generic) lead-times that supplier marketing people tend to cite when quoting jobs.

When I first was faced with developing a lean supply chain I was fortunate enough to be located proximate to the University of Wisconsin-Madison’s Center for Quick Response Manufacturing (QRM). At the time it was run by its founder, Rajan Suri (incidentally, an inductee into IndustryWeek’s 2010 Manufacturing Hall of Fame). When I first met Dr. Suri, he was already working on applying “speed” to the efficiency of individual manufacturers. Working collaboratively, we were able to demonstrate that these same QRM principles can be applied to supply chains.

MCT was one of the metrics that came out of this collaboration and no-one is better positioned than Dr. Suri to provide the documentation your suppliers will need to document and quantify their MCTs. To that point I would recommend purchasing Suri’s MCT Quick Reference Guide. In just under three dozen pages the Guide provides a fundamental explanation of the importance of knowing MCTs as well as a step-by-step outline on how to measure them. After reading it, if you feel it is as useful a tool as I say, order and distribute copies to a “pilot” run of your strategic suppliers along with a request that they provide you with “operational” (office and shop) MCT maps for three part numbers that are representative of the cross-section they sell you.

Of course there is more to understanding the subtleties of MCT than can be covered in a 35-page guide. To get into them, I’d recommend you connect with the previously cited Center for Quick Response Manufacturing. After Suri’s retirement the QRM Center was put in the capable hands of one of his former PhD students and now professor, Ananth Krishnamurthy.

If you go to the “Publications” section on QRM Center website, you’ll find a document named “Manufacturing Critical-path Time: MCT” available for purchase. At $25 it is well worth the cost and will give you as much detail as you’ll ever need to know about MCT.

The key to manufacturers benefiting from work with academic organizations, at least in my opinion, is to find those that can relate to the reality of the shop floor. Over the years the QRM Center has demonstrated that capability in spades.

According to Dr. Krishnamurthy, the Center’s mission is to improve manufacturing competitiveness through research and implementation of lead-time reduction principles. To that end its main activities include:

• Conducting research on issues relevant to lead-time reduction.

• Conducting educational activities to spread the knowledge obtained from such research.

• Conducting implementation projects in collaboration with industry to validate theories and findings.

The QRM Center has various levels of company membership and, if you or some of your suppliers are located in the upper Midwest—close to its home in Madison, Wisconsin—you may even find yourself in position to sponsor some student-staffed projects.

In finishing this entry I’ll point out that above I referenced suppliers defining their “operational” MCTs. This implies both “office” and “shop floor” activities are included, and they are important to understanding “true” supplier lead-times. But operational MCT doesn’t tell the complete lead-time story. Logistics time almost makes up a critical element of a product’s MCT and so impacts the ability of the supplier to provide lean supply chain performance to its customers.

To address this in the next blog entry I’ll be discussing how MCT can help clarify what can be a very touchy subject: the pros and cons of overseas sourcing.